There’s an invisible thief at large, who keeps on stealing your savings on a regular basis.
No matter what year it is, or what time it is, the real value of your money reduces with each passing year. Who is this thief that I speak of?
It’s called INFLATION !
Inflation is basically the consistent rise in the average purchase price of goods and services over a period of time. With each round of price increase, every unit of cash purchases a reduced amount of concerned goods or services, than before.
This is basically a decrease in the purchase power of a unit of cash.
For example, let’s say you have a non-interest bearing deposit of ₹ 100,000. After 5 years of sustained inflation at rate of 6% per annum, the same amount of cash would be equivalent to ₹ 74,725.82 in today’s time.
So your bank balance would still be the same, but the purchasing power of your savings reduced by about 25% over a period of just 5 years !!!